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Manitoba's housing affordability remains in check: RBC Economics

TORONTO, June 22, 2015 /CNW/ - Housing affordability in Manitoba
continued near long-term averages in the first quarter of 2015, while
markets remained well supplied, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.

RBC notes that affordability for single-detached homes and condos in
Manitoba evolved in opposite directions during the first quarter.

"A wave of new multi-unit completions in Winnipeg last year caused some
absorption issues in Manitoba, ultimately weighing on condo prices in
the resale market in Q1. Soft condo sale activity also contributed to
these weaker prices," said Craig Wright, senior vice-president and
chief economist, RBC. "On the other hand, resales of bungalows and
two-storey homes perked up, supporting price increases and leading to
some modest deterioration in affordability."

RBC says that current housing affordability conditions in the province
likely do not pose unusual challenges for home buyers as affordability
measures remain remarkably close to long-term averages.

The RBC Housing Affordability measures, which capture the province's
proportion of pre-tax household income needed to service the costs of
owning a home at market values, were mixed in the first quarter of 2015
(a decrease in the measure represents an improvement in affordability).
RBC's measures for both bungalows and two-storey homes rose by 0.3
percentage points to 35.6 per cent and 36.9 per cent, respectively. The
measure for condos fell noticeably by 1.1 percentage points to 22.2 per
cent.

During Q1 2015, affordability measures at the national level edged lower
by 0.3 percentage points to 27.1 per cent for condominiums and 0.2
percentage points to 47.9 per cent for two-storey homes. The measure
for detached bungalows was unchanged at 42.7 per cent.

The RBC Housing Affordability measure, which has been compiled since
1985, is based on the calculated costs of owning a detached bungalow (a
reasonable property benchmark for the housing market in Canada) at
market value. Alternative housing types are also presented, including a
standard two-storey home and a standard condominium apartment. The
higher the reading, the more difficult it is to afford a home at market
values. For example, an affordability reading of 50 per cent means that
home ownership costs, including mortgage payments, utilities and
property taxes, would take up 50 per cent of a typical household's
monthly pre-tax income.

It is important to note that RBC's measure is designed to gauge
ownership costs associated with buying a home at present market values.
It is not a representation of the actual costs incurred by current
owners, the vast majority of whom have bought in the past at
significantly different values than those prevailing in the latest
period.

• Home resales plummeted more than 16 per cent in the province during
Q1, contributing to price declines across housing segments. The impact
on affordability was partly muted by a moderation in household income.
RBC's measures fell 0.1 percentage points for condos, rose 0.3
percentage points for bungalows and remained unchanged for two-storey
homes.

• For the past four years, owning a single-detached home at market
prices in the province has become less and less affordable, whereas the
weight of owning a condo has remained fairly constant. RBC's measures
for bungalows and two-storey homes rose by 0.3 percentage points, while
the measure for condos edged lower by 0.2 percentage points.

• After remaining steady for years, housing affordability improved in
the province over the course of 2014 and the trend continued in Q1
2015. RBC's measures fell across all three categories tracked (between
0.3 and 0.1 percentage points).

• The lingering effect of earlier softness in home resale markets led
to further improvement in housing affordability in the Atlantic region
in Q1. RBC's affordability measures fell 0.7 percentage points for
bungalows and 0.5 percentage points for two-storey homes. The measure
for condos was unchanged.

The full RBC Housing Trends and Affordability report is available online as of 8:00 a.m. ET today.